Will you still love me after Budget 2018?
NAMO and Arun Jaitley are both battle-hardened and seasoned politicians. They know that big-ticket and radical taxation measures cannot be ushered in overnight.
Instead, one has to gradually prepare the ground and de-sensitize the populace so that there is minimal shock and surprise when the changes are made.
NAMO sent the first feeler during Budget 2017 that changes with respect to the tax exemption for capital gains are in the offing:
“Those who profit from financial markets must make a fair contribution to nation-building through taxes. For various reasons, the contribution of tax from those who make money on the markets has been low. To some extent, it may be due to illegal activities and fraud. To stop this, SEBI has to be extremely vigilant. To some extent, the low contribution of taxes may also be due to the structure of our tax laws. Low or zero tax rate is given to certain types of financial income. We should consider methods for increasing it in a fair, efficient and transparent way,” NAMO said, sending a chill down the spine of all market participants.
However, this statement created such uproar amongst citizens that NAMO and Jaitley had to beat a hasty retreat.
“I wish to absolutely clarify that there is no occasion or opportunity for anybody to reach such a conclusion because this is not what the PM said, nor is the intention of the government as has been reported,” Jaitley hastily clarified while trying desperately to control the damage caused to investors’ sentiments.
It is a myth that common man wants “freebies and sops“
Now, in Budget 2018, the duo of Modi & Jaitley is once again testing the waters.
“Budget 2018 may not be populist,” Modi said, hinting that the time to feast on “freebies and sops” is over.
“Common man does not want all these things. It is a myth,” he declared.
He also sent a teaser whilst interacting with the captains of Industry:
“Aap hans kyon nahin rahe? (Why aren’t you smiling) … All of you seem pleased with me at the moment, but let us see what you say after the budget is presented,” Modi said even as the Honchos cringed in dread that the Budget would impose new levies.
क्या शेयर बाजार में होगी लॉन्ग टर्म कैपिटल गेन्स टैक्स की वापसी? #LTCG #Tax @anilsinghviCNBC @Hemant_Ghai pic.twitter.com/UDn5jqmO8x
— CNBC-AWAAZ (@CNBC_Awaaz) January 11, 2018
Samir Arora and Latha Venkatesh lock horns over taxability of capital gains
Latha Venkatesh, the veteran editor of CNBC TV18, wrote a piece in which she gave ten reasons why capital gains on shares deserves to be taxed.
She described the argument that foreign countries don’t tax capital gains as a “bluff” and produced data which showed that only five Countries, which have the dubious reputation of being tax shelters for tax evaders, exempt capital gains. Most other respectable Countries levy tax on capital gains, according to the data.
This article irked Samir Arora, the illustrious fund manager of Helios Capital.
“Latha Venkatesh’s article is so off that it deserves a detailed response,” he said, his nostrils flaring in anticipation of a debate.
.. @Latha_venkatesh article in Mint is so off that it needs detailed response.
1. USA/Europe/Japan etc DO NOT charge capital gains tax on securities to foreign investors. For ex. In USA foreign investors pay 30% tax on dividends and ZERO LTCG or STCG 1/n— Samir Arora (@Iamsamirarora) January 9, 2018
Samir Arora was backed by his vast army of followers which comprises of several distinguished personalities.
Excellent factual rebuttal, sir.
— Deviprasad (@deviprasadv) January 10, 2018
However, Latha Venkatesh is no pushover. She is well versed with complex macro-economic issues and was not intimidated by Samir Arora’s aggressive rejoinder.
She not only did not concede her point but instead gave a point-by-point rebuttal to all of Samir Arora’s points, cheered by her own army of fans.
Read the article after the rebuttal. Being against LTCG was was expecting to be outraged. Surprised to find the article much reasonable and raises some good points. Equity vs debt, international practice, record flow into equity Mf, setting off STT which the rebuttal has ignored.
— Shashank Tripathi (@shekharpati) January 10, 2018
By the EOD, the two stalwarts realized that neither would be able to persuade the other to a change of stance. They resolved the stalemate by agreeing to disagree with each other.
Arch rivals Shankar Sharma and Samir Arora come together to combat LTCG tax
Shankar Sharma and Samir Arora are known to be arch rivals. One can see them constantly spar with each other over various esoteric issues relating to the state of the Country’s economy.
Neither misses an opportunity to find fault with the other’s view.
However, the dread about LTCG tax united the two opponents.
Shankar was his customary blunt self.
“Long-term tax could kill cult of equity investment in India,” he declared with a flourish.
“Bull market thinking is pushing bizarre ideas. If instead we get into a bear market, then the government will do everything to attract investment instead of taxing investors. We should not de-incentivise people from entering into the equity market. It is only in the bull market scenario that government can talk about such a tax whereas there they will prudently reverse any such measures to attract inflows whenever there is a severe correction in the markets,” he added in his deep baritone.
Samir reiterated his pet point that India should not tax capital gains because that would make it uncompetitive and unattractive to foreign investors.
“Foreign investors are not taxed in most developed countries. India is already charging transaction tax on equities, which is levied irrespective of profits or loss. In such a scenario, what is the use of bringing in LTCG, when government has no idea how much it will yield and more than that kill the equity markets. This is not a reform in any way,” he said.
(Musclemen: Shankar & Samir flex their muscles in a show of strength)
Dinesh Kanabar, the distinguished tax expert, is irked at the constant tinkering of tax laws by the Government.
“One cannot have a situation where tax regime changes every year,” he pointed out.
He also emphasized that even if long-term capital gains are to be taxed, that can only be done for fresh purchases and not for past transactions.
He also advised the Government to take the middle path by increasing the holding period for computing LTCG instead of doing away with the exemption completely.
Citizens oppose LTCG
The points made by Shankar Sharma and Samir Arora reverberated amongst celebrities and rank and file citizens. Several came out strongly to oppose the tax on capital gains.
Long term cap gains……NO NO NO……clear No https://t.co/MtMWIX9Lim
— Anil Singhvi CNBC (@anilsinghviCNBC) January 11, 2018
I couldn't agree more. If they do incorporate that then @narendramodi @arunjaitley won't get my vote in 2019.
— Kaival (@KaivalDave) January 11, 2018
Sarkar public Ka paisaa lut rahi hai income tax bharne ke bavajut indirectly tax chahiye LTCG KE ROOP ME GST KI DEFICITS PURI KARNEKE LIYE YE SARKAR KISI BHI HAD TAK JA SAKTI HAI
— MALHAR RAO. (@malhar_rao) January 13, 2018
@arunjaitley @narendramodi Sirs-Request u not to tax LTCG of equity related instruments leaving it as it is.Equity investors take risks for any gain & their risk taking ability must not be taxed.Many Sr.Citizens are retail equity instrument investors too.
— CC (@CCgaru) January 24, 2018
A BIG NO TO THE STEP OF LTCG?
— Hunny Gulati (@hunnygulati83) January 12, 2018
Some warned in a grim tone that this is the “final nail in the coffin” and that the stock markets would crumple like a ton of bricks if the tax proposal becomes reality.
With talks of extending LTCG period on shares to two years or more, the stock markets are upto a major fall before Budget
— Shivam Goyal (@shivamgoyal26) January 21, 2018
@arunjaitley if imposes LTCG on Stock markets, it will be a last nail in the coffin of economy.
Government will loose more money than they expect to make it from LTCG.
Go ahead, we don't expect good things from you @FinMinIndiaAbolish income tax if you want economy to revive
— Harish Sharma (@hk160564) January 24, 2018
However, Porinju baffles by supporting LTCG
Porinju Veliyath shocked everyone by turning contrarian and supporting the tax on capital gains.
“I’m all for putting up to 10% tax on LTCG. This tax may come and go. It won’t make a much difference to long-term investors,” he said.
“Nobody will stop investing in stock market just because of the tax. I would advise investors should ignore the buzz around LTCG and Budget, and just focus on stock-picking,” he added.
10% LTCG is fine; existing grey areas about it, discretionary/harassing powers given Tax Officials is hurting many investors/honest payers!
— Porinju Veliyath (@porinju) February 29, 2016
Porinju’s stance softened the sentiments of some investors.
Even if Govt. comes up with LTCG…looks like market would take it on its Chin and move on. #Budget2018 Not an opportunity to be missed by investor's
— K.P.Nagarajan (@UnagK) January 12, 2018
Bimal Jalan To CNBC-TV18 | If the economy is doing well, govt can decide on LTCG tax; Have to support the farmer at all costs pic.twitter.com/guwgSwHwo0
— CNBC-TV18 (@CNBCTV18Live) January 12, 2018
Does NAMO listen to Porinju? Is Porinju echoing the Govt’s views?
Porinju has clarified on an earlier occasion that he is not a “BJP guy”. However, there is circumstantial evidence that suggests that either NAMO and/or the top brass of the BJP/ Govt may be paying heed to Porinju’s views.
First, Porinju has the unique distinction of receiving a direct communiqué from NAMO. This was interpreted as a significant event by knowledgeable watchers.
Woah!!! I am sure the PM doesnt thank every now and then.. Your tweets must have stuck a chord
— Niraj Shah (@_nirajshah) March 7, 2017
yes Sir, it's great to be greeted by the PM. And see @LittyPorinju Ma'am is your senior here ? https://t.co/xOeej6n4Ea
— Singaraju (@Singaraju_R) March 8, 2017
Second, Porinju boasts of the highest number of followers amongst fund managers. His massive army of 8,60,000 followers is second only to that of the legendary Warren Buffett.
Looks like I am the most followed Fund Manager on Twitter globally after @WarrenBuffett ? pic.twitter.com/3O9NF2FiC5
— Porinju Veliyath (@porinju) January 9, 2018
People with such massive army of followers enjoy the exalted status of “social media influencers” and are much sought after by marketing experts and political leaders.
Third, Porinju fearlessly takes potshots at RaGa and the Congress party. He has described RaGa as being “intellectually challenged” and the Congress as a “party of criminals”.
2017 – Corruption, Crime & Congis will decline, White will prevail over Black; Investors be ready for a series of positive triggers in 2017.
— Porinju Veliyath (@porinju) December 30, 2016
Such attacks by Porinju are very valuable to the BJP given his reach and popularity amongst rank and file citizens.
So, it may not be an exaggeration that someone in the top echelons of the Government may have asked Porinju to speak up in favour of the LTCG so as to soften the sentiments of investors.
Conclusion
Prima facie, the levy of tax on long-term capital gains in one form or the other appears imminent. It is better if we prepare ourselves for the eventuality by having dry gunpowder in our armoury to take advantage of the correction!
No Indian citizen wants to vote for Rahul baby. And no one will. But Modi and Jaitley please don’t force people to abstain. This is called shooting yourself in the foot. The gains from taxing will far underwhelm the damage of continuously changing tax laws and sentiment. The seriousness of the matter must be taken into consideration. Any move the doesn’t bolster investment sentiment is a vote lost for 2019. Citizens will not vote for Rahul, but they will abstain from voting for Modi. And as we all know elections are won primarily on which party holds the most enthusiasm among voters. I cannot vote for a party which depresses the business sentiment I live off.
I just comment on your first two lines . What you said is a seasonal syndrome and this syndrome wont last for ever. Rahul Gandhi (not baba as you mentioned) is so matured now
Listen to me ok! This is not a political perception or vice versa. Your statement of Rahul BABY being matured is an utter ignorant and oxymoron statement in itself. A man who has looted the country, preyed on the fabric of Indian society by fueling divisions and fear, hiding behind names such as secularism, and attacked the integrity, nationalism and economic agenda, is nothing but a servant of evil.
The next thing you will say is Nazi Germany should be given a second chance becuase the party would have MATURED now. Failing to understand what the party stands for and what the party has stood for is maximum ignorance and self destruction.
As young Indians I implore all of us to stand together for a clean India. An India that will not accept rubbish infrastructure. And India where every Indian comes first. An India where no foreign national will dare to insult or mistreat you. An India where we fight on the debate of development and job creation instead of caste lines and fear mongering.
Can One Indian please riot for these very basic rights instead of rioting for movies, castes and self declared God men.
Supporting Rahul pappu is not the answer to annoyances with the PM. A vote for Rahul is a slap in the face to each and every newborn child in India. A pap no Indian should commit.
Modi Govt will be remembered as Self Goal Govt. This Govt is bent upon doing every foolishness possible to ruin Indian Economy. First it derailed Indian Economy by thoughtless Demonetisation, after that poorly implemented GST. Now if it is LTCG, than it will be third self goal in a row. Any way this Govt is going for heavy thrashing in state elections this year and LTCG will be Kafan ki Keel. Any way this is their last chance, they may do everything possible to derail , what ever is left, I mean Stock Market.
Absolutely right Kharb ji. Whenever I right anything against views of NaMo or porinju it is now been published. But I have seen comments against Rahul
Gandhi and Congress Leaders are published with out any screening. Ridiculous site management by admin. I think stop browsing this site for their unfair practice
Heavens r not going to fall with LTCG except for a temporary market blip. The current bull market will take such eventuality in its stride like it did several times earlier to begin with BREXIT, Surgical strike, REXIT, DEMO etc.. etc.. Such move will bw immensely beneficial fir the economy and in turn to the markets as well in the medium term.
This Govt was elected on promise of removing corruption. It was corruption which was wasting lot of money. If this Govt claim(although no body will accept) that it is reducing corruption, then it might have saved billions, in that case it should give tax breaks. But this Govt is Tax Hungary Govt, with poor delivery record.This Govt hunger for more taxes shows, corruption has gone up, so it requires more money for its daily requirements, with infrastructure spending all time low. People are still unable to find answer where several lakh Crores looted from public pocket has been wasted, by not reducing petrol prices when international prices were low.
Absolutely right Kharb ji.
Dear Kharbji,
It needs money to modernize military, build roads and develop infrastructure, Pay OROP to army .
Previous government ignored all the needs of the army due to their tainted image and they did not had enough money due to continuously increasing Deficit .
When fiscal deficit is reduce by 1.5% It was because there was no corruption . If there would have been corruption this government too wouldn’t have money for defense deals, reducing account deficit, quick focus on North East infrastructure .
Its really disappointing to see such baseless comments and propaganda from learned and knowledgeable boarder .
Best Regards,
No stupid measure would make heavens fall. For a gain of 20K crores, we would see big erosion of investors wealth in coming days. Don’t see why PM/FM chosen to levy LTCG in final year. They could have done it after winning next term. Although some may speak that it is not a big deal, but negative sentiment is a big factor for markets. Many may sell in coming days to get away from LTCG. SIP calcs for LTCG definitely going to be night mare that many of them having SIPs in multiple funds.
I love Porinju, The most Patriotic, Nationalistic, competent and the most honest Fund manager in the country,
While you love Porinju he is not sharing losses with the investors and is only sharing profits.. May be if LTCG is a must it should be only on PMS who doesn’t share risks and not on individual investors… Let’s see honest Porinju’s reaction after that…
Absolutely right
I would just like to mention one thing:::
I am not a politician and I do not support BJP, Congress or JD or any other party for that matter.
These are my personal views.
Everything is interconnected -wired in this world of today. When US and China start tanking, the entire world markets will drop. All the world markets rise in UNISON and we have seen this effect in 2008 and also in 2000.
Remember 2008, the US market tanked and the great statements made by our then finance minister and PM himself – That time was the Congress regime. The Indian market tanked after 6 months and went down to 6700(BSE) from 14500.
Modi and Jaitley and all stalwarts are making tall claims today. I would like to see that the Indian stock market stands up even if others tank.
Will it last if US market starts tanking… or China for that matter.
If China sneezes, US catches cold… and that is true…
I have not seen job growth in India but policies which are making life difficult for common man.
US stock market has risen from 17500 when Trump was voted President to 26500 (in one year). So Dow has risen more than 50% in less than a year.
Money is flowing back to US since corporate tax rates have been reduced to 20% and 15%. Even 7.5% for investments abroad which are now to be invested in US.
I am not sure our markets can withstand the heat if US and China plummet.
Of all great things said by BJP or Congress or whoever, India does not get a 2×2 inch mention on Wall Street Journal, New York Times or Washington Post on a daily basis. There are pages devoted to China every week and the Chinese growth.
We need to introspect and retrospect how we can make our country great…
AGAIN, THIS IS NOT TO CRITISIZE ANYONE BUT THE HOLLOWNESS OF OUR POLITICIANS WHO INDULGE IN SELF-CONTAINMENT AND ACT CONCEITED.
You are absolutely right, in India politicians are making fools of public and if any one Question, there are many Andhe Bhakt who will come in defence of these politicians. I don’t know they are paid or doing free service for their masters.
Exactly, there are paid sites as well
ax Overhaul Rips Through U.S. Business Landscape==== FROM WALL STREET JOURNAL – 01/26/2018
HOW THE US TAX LAWS ARE CHANGING AND BRINGING INVESTMENTS TO US.
THE GREAT MODIS, JAITLEYS, AND CHIDAMBARAMS AND MANMOHAN SINGH CAN LEARN FROM TRUMP WHO IS MORE OFTEN CRITICIZED IN INDIA
Firms quickly dust off plans for new investments, stock buybacks
Just weeks after the federal government adopted the biggest tax overhaul in three decades, the effects are rippling through corner offices and boardrooms, with companies large and small dusting off once-shelved plans, re-evaluating existing projects and exploring new investment in factories and equipment.
Specialty drugmaker Amicus Therapeutics Inc. has decided to spend as much as $200 million on a new production facility in the U.S. instead of Europe. Kimberly-Clark Corp., maker of Kleenex tissues, is spending hundreds of millions of dollars to put new machinery in one of its U.S. factories, even as it closes others and cuts thousands of jobs. Aramark, the catering and uniform giant, expects to save nearly $500 million on two recently completed acquisitions.
The rapid adaptation goes well beyond the early announcements of $1,000 bonuses or minimum-wage increases for rank-and-file.
Along with announcing its repatriation of cash held overseas last week, Apple Inc. pledged to invest $30 billion in the U.S. that it had held abroad, despite having to pay $38 billion under a one-time tax on those accumulated foreign profits. Goodyear Tire & Rubber Co. now estimates it won’t pay cash taxes until 2025, because its existing credits will stretch out an additional five years when used to offset taxes at new, lower corporate rates.
That the tax bill will have significant effects on corporate finances is certain, though the effects can vary widely by company. Already, analysts expect the legislation to provide a 7% to 8% boost in aggregate per-share profits for the companies in the S& P 500 this year, said Joseph LaVorgna, chief economist for the Americas at Natixis, an international financial-services arm of France’s Groupe BPCE.
A big part of that comes from companies spending more, feeding revenues to other firms in what can become a virtuous cycle, Mr. LaVorgna said. He believes analysts and the market may be underestimating the effect.
“Somebody else’s capital outlay is another company’s income,” he said. “If there’s a surprise, things may actually be better.”
Amicus, which had been using Chinese contract manufacturer WuXi Biologics to supply the drug, decided in August to build its own facility. The U.S. was at a disadvantage to Europe, due to its 35% statutory federal income-tax rate for companies. Ireland’s corporate tax rate, by contrast, is 12.5%.
Those financial considerations threatened to overshadow other advantages that a U.S. plant would offer.
“Our strong assumption was that it would be very challenging to establish a new biomanufacturing facility in the U.S.,” Chief Executive John Crowley said in an interview.
As the tax legislation advanced in Congress last fall, however, building in the U.S. began to look more attractive. Mr. Crowley recommended to his board the company focus on finding a U.S. site. The company has narrowed its choice to three East Coast cities Mr. Crowley declined to identify. It expects the plant to cost $150 million to $200 million, and to employ at least 200 people at an average pay of $100,000 a year.
The rules of deal making, too, are changing. In the past two months, Aramark completed two acquisitions with a price tag of $2.35 billion as it snapped up hotel procurement and supply firm Avendra in December and uniform-rental and linen-supply firm AmeriPride Services Inc. last week.
Both are a kind of deal that, thanks to the new tax law, has become cheaper. One provision lets companies deduct the cost of buying some sorts of assets immediately, instead of over several years as prior tax law required—and expanded this treatment to used assets as well as new ones.
That essentially lets a buyer like Aramark get an immediate discount on the cash cost of part of its deals, the portion that reflects the acquisition of equipment, machinery and other tangible property.
Aramark’s acquisition of Avendra, a partnership, is automatically treated as an asset purchase, New York tax consultant Robert Willens notes, while deal documents indicate
Aramark and AmeriPride agreed to treat that acquisition as an asset purchase as well for tax purposes.
In news releases, Aramark described its after-tax cost for the two deals as $1.86 billion, 21% less than the pretax price. Aramark said in a statement that it continues to evaluate the impact of the new tax law with accounting firm KPMG LLP, and plans to update investors on the acquisitions when it reports quarterly earnings on Feb. 6.
The same provision, speeding up tax deductions for capital spending, has prompted Kimberly-Clark, the diaperand tissue-maker, to accelerate at least one major project, CEO Tom Falk said. The company’s board votes next month on a U.S. factory retooling expected to cost hundreds of millions of dollars. There wasn’t a timeline for the project previously.
Robin, you are right, but in India politicians need not to perform as there are many fools /Andhe Bhakt to support them on caste, creed, religious, regional lines . if any body will question them on performance, then their are misinformed, Brain washed Bhakts will start abusing the person who is questioning.
Has any black money come out of the closets of so called great Swiss Bank accounts of whosoever. Black money was the first item on the government’s agenda. Instead, I see whole lot of other policies which have made life difficult for common man.
I have seen people wait in line for 4 hours to get their cell number linked to aadhar card. I have seen people stand in line from morning to evening and also die for getting a measly 2000 of their own money. Now bansk, have started charging for keeping your money if you withdraw more than 6 times.
Instead of trying to boost the economy via job creation, I see propagance and self-praise.
What I see and read is: During any municipality, state or local election, whatsapp and facebook accounts become very active. The digital marketing teams of whichever party – be it the BJP, Congress or JD or AAP is in full swing. More importantly, stupid remarks and self praise coming from BJP.
I think we should levy 20% taxes on PMS schemes and then see what is the impact on Porinju and others of his ilk, like someone has rightly suggested.
If you are making lot of money and dont want income tax dept coming for search, Start praising Govt like many Andh Bhakts and enjoy tension free life. Many smart people are fooling this Govt like this. Have you ever heard Income Tax or CBI raids on any big Govt supporter.
You are right Kharb Ji. I have noticed a much fancied and most popular fund manger (famous in social media) from south used to talk about India growth story when UPA govt was in power. now he supports modi blindly. sure he will change his opinion when govt changes in centre
Will the government compansate for capital losses in equity market.
It can be set off against capital gains over 8 years.
Government wants to kill the goose laying golden eggs.. Retail investors have just started coming to equity markets after 10 years. 10 percent correction in market due to LTCG will make them ignore stock markets for next 10 years
You are 100% right, many first timers has come to stock market by leaving unproductive assets like Gold and Real Estate. Any Govt made correction by implementing LTCG will force them out for ever from Capital market. But this Govt is not habit of thinking before any act. They do it first and after it back fires, they start fire fighting.
Kharbji,
with due respect , you are absolutely wrong .
The country where only 1% pays the tax, whats the problem in paying 10% Tax after holding 1 year .
We peoples want good infrastructure , cheaper fuel, no GST but we do not want to pay the Tax .
Looks at western world where stock market returns are minimal and there they pays tax on it happily.
In India we are getting astonishing returns but we do not want to LTCG .
We can hate specific government but we need to use our common sense while criticizing .
Thanks
you are absolutely right
What is the fuss about ? the period of holding increases to more than one year or LTCG returns ? Either way it will be a good move and government will gain more in tax revenue and it will help curb speculation, money laundering in the market. However the government should also consider removing multiple taxation like dividend distribution tax, STT. The ultimate tax structure should be fair to avoid multiple taxation on the same income/profits and increase compliance.
Go Porinju
Use the market correction to snap up some stocks at 5 /10% discount in the event of introduction of LTCG. Retail investors are not greatly concerned about tax free returns. Anyway they still get their 15 /20% kind of returns and perhaps the end kitty would be lower by just 1 to 2%. What difference it makes to them. HNI and institutional investors anyway have no other way but to keep invested in the market. Only FIIs may be a little reluctant. Even if they r hesitant, the excess liquidity would come to a reasonable level and market gyrations would be moderate. Just wait for the moment and deploy any surplus cash to pick up missed opportunities at slightly lower levels.